LALITPUR POWER GENERATION COMPANY LIMITED ,MUMBAI vs. ACIT, CIRCLE 3(2)(1), MUMBAI

This appeal filed by the assessee is directed against the order dated 10.09.2025 passed by the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi, for the assessment year 2015–16, arising from the assessment framed under section 143(3) of the Income Tax Act, 1961.

During the relevant previous year, the project was under construction and the assessee had parked temporarily surplus funds, primarily out of borrowed funds earmarked for the project, in short-term bank fixed deposits. The stated intent of such deposits was not to earn interest income but to mitigate project cost. The interest earned on such deposits was adjusted against Capital Work-in-Progress (CWIP) in the books, treating the same as capital receipt on the ground that it was inextricably linked with the setting up of the project.

The Assessing Officer, however, in the order passed under section 143(3) dated 19.12.2018, treated the interest income of Rs. 6,09,82,388/- as taxable under the head “Income from Other Sources”. The said addition was subsequently confirmed by the Ld. CIT(A).

The Ld. Authorised Representative submitted that an identical issue had arisen in the assessee’s own case for the immediately preceding assessment year 2014–15, wherein the Coordinate Bench of the Tribunal in ITA No. 3566/M/2019 and CO No. 64/M/2020 restored the matter to the file of the Assessing Officer. While doing so, the Tribunal relied upon the decision in the case of Bajaj Energy Ltd. and the judgment of the Hon’ble Supreme Court in the case of CIT vs. Karnal Co-operative Sugar Mills Ltd., directing the Assessing Officer to verify whether the interest income was derived from borrowed funds directly linked to acquisition of plant and machinery, in which case it

It was further submitted that pursuant to the Tribunal’s directions for AY 2014–15, the Assessing Officer passed an Order Giving Effect, wherein after verification, only a portion of the interest income amounting to Rs. 62,75,478/- was treated as taxable, and the balance was accepted as capital receipt being inextricably linked with the project.

The Ld. Authorised Representative also submitted that in the year under consideration, certain additional evidences relating to bifurcation of interest income were filed before the Ld. CIT(A) for the first time, which were not examined by the Assessing Officer. It was contended that the factual matrix remains identical to that of the preceding year.

It was further submitted that the assessee had worked out interest of Rs. 5,48,32,562/- as attributable to borrowed funds utilized for project purposes and Rs. 61,49,826/- as attributable to own funds. Accordingly, it was argued that, without prejudice, only the latter amount could be considered as income from other sources.

The Ld. Departmental Representative, on the other hand, relied upon the orders of the lower authorities.

We have heard the rival submissions and perused the material available on record. We find that the issue involved in the present appeal is identical to that adjudicated by the Coordinate Bench in the assessee’s own case for the immediately preceding assessment year. We further note that the Assessing Officer has not had the opportunity to examine the additional evidences and detailed bifurcation now placed on record. In these circumstances, respectfully following the decision of the Coordinate Bench in assessee’s own case for AY 2014–15 and in the 3

In the result, the appeal of the assessee is allowed for statistical purposes.